American Ingenuity Huawei

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     American ingenuity
     taking broadband
     to new heights
     In the United States, the broadband subscriber base is
     getting wider and broadband services more diversified.
     Creative American companies are catalyzing a new wave
     of broadband network construction and operations.
     Cable and satellite TV operators and Google-led IT
     pioneers are joining traditional telecom operators in
     exploring the broadband market and finding their niche
     segments that match their own resource bases for more
     promising business outlook.
                                                   By Zhou Jing

                  espite concerns over an economic meltdown, the
                  U.S. telecom industry has maintained a robust
                  growth momentum breathing new life into
                  the nation’s economic recovery. In 2009, tier-1
     operators in the U.S. reported CAPEX of over 51 billion
     USD, and earned over 350 billion USD from telecom
     services including pay TV. Largely driven by broadband
     services and network construction under innovative business
     models, their combined earnings before interest, taxes,
     depreciation and amortization (EBITDA) soared 35% over
     the previous year.

                                                   Win-Win / AUG 2010
Traditional telcos and network-                               revenue. To better serve this segment worldwide, AT&T
                                                              prioritizes personalized services over the mobile Internet
based service growth models                                   as part of its enterprise service portfolio along with voice
                                                              transfer and mass data transfer services. Business customers
   Compared with other industry players, traditional          can now employ various technologies and develop software
leading operators continue to generate higher total service   and applications for end consumers to download; AT&T
revenues from their existing network infrastructure and       shares in the profits.
subscriber base. However, if only connections and access         Additionally, AT&T is accelerating its efforts to offer
services are offered, they could plummet to the bottom        more cloud computing-based commercial applications
of the industry chain. In response, they have stepped up      for businesses to deliver powerful computing capabilities,
efforts to consolidate networking resources and explore       massive storage and a wide selection of applications by
service growth models in addition to delivering high-         utilizing IT resources flexibly. Therefore, the operator has
quality, high-speed and low-cost networking services.         developed a unique ability to send data from managed
                                                              terminals to application desktops, while providing server
AT&T deploys Wi-Fi to facilitate service                      and data center solutions.
                                                              Verizon seeks a new balance between voice and
   As the leading integrated service provider and the
operator that possesses the most Wi-Fi hotspots in the
U.S., AT&T has established a network infrastructure that         The U.S. probably has the world’s highest mobile
combines Wi-Fi, WiMAX and cellular capabilities that are      minutes of usage (MoU) per person per month, in excess
adaptable to Internet services. The Wi-Fi network fuses       of 800 minutes. However, fierce competition in the voice
the cost efficiency of IP networks with the enormous size     market has seen prices swiftly drop and voice traffic growth
of mobile networks while removing the access bandwidth        slow down. Faced with this situation, operators can achieve
bottleneck of mobile networks, and greatly enhances user      steady revenues only when the contribution of data services
experience.                                                   to the average ARPU grows at a rate higher than 1.5%.
   By differentiating Wi-Fi subscribers through automatic        As a leading U.S. integrated service operator and also
access authentication software, AT&T has grown                the nation’s largest mobile operator, Verizon is actively
subscribers and improved their loyalty. High-speed            seeking to create a balance between voice and data services
bandwidth service subscribers get free access to Wi-Fi        for sustainable revenue growth.
hotspots across the U.S. Second-tier subscribers can enjoy       Although most mobile operators hesitate to waive
the Wi-Fi access service for 1.99 USD each month while        charges for long-distance calls and roaming services,
non-subscribers have to pay 7.99 USD per day for hotspot      Verizon has looked to the future and partnered with
access.                                                       Skype. As voice services are giving way to data services,
   AT&T has also greatly eased its network burden by          the operator has begun to open its interfaces for
using Wi-Fi. Notably, mobile service revenue surged           subscribers to use Skype applications on nine bundled
a substantial 10% in 2009 thanks to the increasing            smartphones for mobile Internet communications at a
popularity of the iPhone. Though they account for only        lower price. This marks the beginning of Verizon’s role
3% of AT&T’s subscriber base, iPhone users consume up         shift from a traditional mobile operator to a provider of
to 40% of the company’s total bandwidth. Furthermore,         communication terminal data service solutions.
the growing application data traffic has triggered network       By partnering with Skype, Verizon has gained access to
congestion, blocking some subscribers from accessing the      a vast base of global social networking customers, and has
operator’s network.                                           swiftly entered the youth market and the enterprise market
   Seamless switching between 3G and Wi-Fi networks           dominated by BlackBerry terminals, building a solid
has come to the rescue, alleviating a lot of the blockages    subscriber foundation for its future expansion into data
as iPhone users can automatically switch to the Wi-Fi         services. Also, as a forerunner in the LTE market, Verizon
network when moving within the coverage range, with           is dedicated to meeting the ever-increasing user demand
transmission speeds of up to 11Mbps. The Wi-Fi network        for higher bandwidth and lower latency. Utilizing its
diverts and relieves 3G traffic loads, helping to improve     extensive experience in mobile broadband deployment and
network quality and download capacity and sharpen             solid expertise in LTE wireless broadband, the operator
service competitiveness. In February 2010, AT&T doubled       also plans to move a wide array of applications from wired
the download cap from 10M to 20M.                             broadband networks to mobile networks.
   Enterprise services contribute 40% of AT&T’s total                                         By Wang Kening & Ling Yun
                                                                 The LTE wireless WAN delivers wireless connectivity

                                                      Win-Win / AUG 2010

             Leading incumbents have stepped up efforts to consolidate networking
              resources and explore service growth models in addition to delivering
                   high-quality, high-speed and low-cost networking services.

     to mobile phones and a broader range of consumer                4G capability with the existing EV-DO’s 3G capabililty. It
     electronics and devices. This revolutionizes the revenue        unveiled the industry’s first CDMA/WiMAX dual-mode
     model where operators charge fees from subscribers only,        service package to boost subscriber loyalty by delivering
     and allows for increased profits from offering remote           the highest mobile network speeds. With a 3G service
     information-processing and M2M services to content and          package priced on average at 59.99 USD, subscribers
     application partners.                                           can access unlimited 4G traffic in addition to 5GB of
        Verizon focuses on three areas: consumer electronics         3G traffic over Verizon’s network, or 3G traffic of up to
     products and applications; end-to-end information transfer      300MB over other networks.
     between wireless devices like wireless medical care and            Since Wi-Fi capability is built into increasingly more
     security surveillance applications; and remote information      consumer electronics, Sprint has launched its WiMAX
     processing, such as UPS vehicle tracking.                       network-based 3G/4G wireless routers, which allow multiple
        It is predicted that 70% of the services will be accessed    Wi-Fi devices to concurrently access the wireless broadband
     indoors, and that 20% of this indoor coverage will provide      network. These routers enable subscribers to connect to a 4G
     80% of the service revenue after the 3G network becomes         mobile broadband network via a Wi-Fi-enabled device for
     fully operational. Market research reveals that 85% of U.S.     10Mbps downloads. When the 4G network is disconnected,
     home users potentially demand indoor coverage. As the           the routers can automatically switch to the 3G EV-DO
     operator that delivers the highest network quality in the       network, which supports a peak download speed of 3.1Mbps.
     U.S. with a continual focus on indoor coverage, Verizon         Each subscriber is allowed to connect up to five Wi-Fi devices,
     introduced a Femtocell enterprise service plan for 199.99       such as laptops, cameras and game consoles. Moreover,
     USD in 2010. Femtocell technology has improved indoor           multiple subscribers can access the Internet concurrently
     coverage remarkably within an area of 5,000 square feet         to watch videos, download music and play games while
     (1524 sq. meters), giving subscribers access to faster indoor   browsing the web.
     mobile services via the traditional fixed broadband network.
                                                                     Fixed operators look to home networking
     Sprint Nextel harmonizes multi-technology                          Fixed network operators in the U.S. generally specialize
     networks                                                        in regional operations. Quest and CenturyLink lead the
                                                                     fixed network market, trailing behind the largest integrated
        Among the U.S. mobile operators, Sprint Nextel               service operators, AT&T and Verizon. Fixed network
     supports the most network standards, such as its own            operators generate an ARPU of around 31 USD, which is
     brand iDEN and CDMA networks, and has invested in               far below the level for mobile and integrated operators as
     Clearwire’s WiMAX network. The iDEN network targets             well as MSOs.
     industry and prepaid subscribers, while the CDMA network           To compete with mobile, VoIP and high-speed
     serves high-end subscribers. WiMAX and CDMA networks            broadband access services, legacy fixed network operators
     combine to offer best-in-class high-speed data services.        usually initiate mergers and acquisitions (M&As) to
        As the virtual operator of Clearwire’s WiMAX network,        achieve economies of scale and reduce costs through
     Sprint became the first in the U.S. to deliver a faster         synergy. Speeding up broadband service access and
     wireless broadband network, as WiMAX had a two-year             service bundling helps increase market share by attracting
     head start over LTE. The operator integrated WiMAX’s            subscribers. Entering the wireless market and launching

                                                     Win-Win / AUG 2010
        While increasing the residential and business subscriber base in the
 voice market, MSOs compete strongly with telecom operators. They are seeking to
      upgrade their networks to DOCSIS 3.0 to deliver higher transfer speeds.

FMC to extend service range and build a cost-effective
network infrastructure to lease network resources will also
                                                              MSO reaches beyond cable to
boost competitiveness.                                        multiple services
    Value-added broadband services provide the engine for
revenue growth. These services include home networking           Multiple system operators (MSOs) offer a wide variety
support, security services such as firewall and antivirus     of services such as digital video, VoD, high-speed Internet,
protection, online games and entertainment for residential    VoIP, and voice. They generate an ARPU of 40 USD, a
users, QoS-differentiated services oriented to enterprises    figure far below the revenue level for wireless operators.
and high-end users, and remote file storage.                  While increasing the residential and business subscriber base
    As home networking continues to grow in the U.S.,         in the voice market, MSOs compete strongly with telecom
integrated services that combine voice, Internet and TV       operators by offering high-speed bandwidth based on robust
capabilities have increasingly led the trends. By 2011, the   video and content production and transfer capabilities, as
percentage of U.S. voice subscribers that sign up broadband   well as entertainment. They are seeking to upgrade their
service bundles is expected to climb to 82% from 40% in       networks to DOCSIS 3.0 to deliver higher transfer speeds.
2007. Despite a lower yield than voice services, TV video        MSOs are also making a foray into the wireless area
services generate a new revenue stream for fixed network      through network construction or virtual operations as a
operators as the growth of voice revenue slows.               way to offer Quad-play services that are more competitive.
    Americans spend a daily average of 4.7 hours watching     When Clearwire rolled out WiMAX services, for example,
TV and telecom operators are competing for markets            Comcast, the MSO market leader and a mobile virtual
with cable TV companies by accelerating IPTV services.        network operator (MVNO), launched WiMAX-based
Up to 9 million homes are expected to subscribe to IPTV       unlimited wireless Internet access service alongside
services offered by telecom operators by 2011. By serving     Internet telephony and cable TV services.
subscribers through broadband access and set-top boxes,          Cox Communications, the No.3 U.S. cable TV
telecom operators outperform cable TV companies in terms      operator, has extended its reach to the mobile area
of bandwidth, implement the same marketing strategy as        by building a CDMA EV-DO network, providing
these companies, and offer lower-priced services.             subscribers with one-stop services. While reducing the
    By the end of 2010, over 60% of U.S. homes are            total communication service charge for subscribers,
predicted to have HDTV. That translates into around 80        the combination of multiple services has considerably
million TV sets, plunging HDTV into a new battlefield         bolstered loyalty. For each additional service bundle,
in the U.S. telecom market. HDTV generally requires           the churn rate has dropped 20%. This has helped Cox
12MB network bandwidth for downloading, which is              to differentiate itself from its rivals with a high-quality
still way above the current U.S. average home downlink        network and superior subscriber-centric services.
bandwidth of 7.12MB. Backbone network traffic will soar
at an annual pace of between 50% and 80%, while access
network traffic will grow exponentially. Therefore, telecom   Satellite service operators exploit
operators are investing aggressively in high-speed fiber
networks, hoping to expand the home network market
                                                              spectrum resources to provide a
based on a high-speed network operation platform.             competitive pipeline

                                                      Win-Win / AUG 2010

       Mobile satellite service operators enter the broadband market by partnering or
     merging with emerging mobile satellite service providers, moving to tap the broadband
          market by developing more powerful satellite capabilities and chipsets.

        Mobile satellite service operators enter the broadband            Google offers the world’s most popular search engine
     market by partnering or merging with emerging mobile              and a broad range of Internet services. This growing
     satellite service providers. Mobile Satellite Ventures            number of services includes email, file management,
     (MSV) and TerreStar both announced plans for next-                e-map, text processing, social networking, phone inquiries,
     generation satellite services supporting voice and high-          and video distribution. By marrying superior services with
     speed data transfers. By the plan, they would begin to            a free-of-charge model, Google has built a huge user base
     deploy terrestrial networks after obtaining an ancillary          on an increasing number of services, paving the way for
     terrestrial component (ATC) license from the Federal              the Internet giant to expand into network operations. In
     Communications Commission (FCC), as part of their                 terms of mobile phone services, the terminal operating
     move to tap the broadband market by developing more               system, and network infrastructure construction, Google
     powerful satellite capabilities and chipsets.                     has launched a series of initiatives to hone its competitive
        A terrestrial network does not necessarily require             edge in the application service market and direct users
     nationwide coverage, and instead focuses on specific              toward high-speed broadband services.
     areas, such as university campuses, commercial centers,
     and areas outside the coverage range of terrestrial mobile        Expanding the mobile market with a service
     cellular networks. The ability to switch between satellite        combination
     and terrestrial mobile cellular networks appeals strongly to
                                                                           Despite fat profits from PC application services, Google
     subscribers. Satellite-based mobile phones are already on
                                                                       is expecting to profit more from target mobile subscribers.
     the market. Inmarsat has unveiled the ISatPhone service
                                                                       The company serves over 30 million mobile Internet users,
     that provides satellite and GSM connections, positioning
                                                                       which account for more than 60% of the total U.S. Internet
     the operator as a pioneer in mobile satellite services.
                                                                       user base. It has created a synergy between mobile searches
        Although a number of leading tier-1 operators have
                                                                       and other mobile applications such as location services
     acquired spectrum frequencies that cover most of the U.S.
                                                                       and voice inquiries. This has brought Google a long-term
     over the last two years, a host of other operators are still in
                                                                       revenue stream from applications similar to telecom services,
     need of additional spectrum frequencies. This has created
                                                                       while at the same time attracting more users.
     a business opportunity for satellite service operators. As
                                                                           Users can dial 1-800-GOOG-411 for Google’s voice
     each MHz-POP spectrum costs only 0.17 USD, which is
                                                                       inquiry service free of charge that gives callers a computer
     about one-fifth of the price charged by other operators,
                                                                       response from Google. They are then prompted for a
     satellite operators are beginning to study the feasibility
                                                                       reply to these requests such as “Please comment on our
     of constructing a nationwide high-speed mobile network
                                                                       service after hearing a tone” or “Please press a key to rate
     at low cost. Their aim is to profit from wholesaling
                                                                       the service”. Besides giving users easy and free inquiries,
     bandwidth resources to other leading or regional operators
                                                                       Google identifies user behavior and requirements and
     at competitive prices.
                                                                       has established a massive database of comments and
                                                                       recommendations. The database enables Google to get
     Google expands from Internet to                                   a clear picture of regional information, accurately target
                                                                       potential customers, and establish a focused marketing
     telecom network access                                            model in cooperation with ad agents.

                                                       Win-Win / AUG 2010
     In terms of mobile phone services, the terminal operating system, and
network infrastructure construction, Google has launched a series of initiatives to
           hone its competitive edge in the application service market.

   Google has continuously invested in location services      Map services. In the future, Android will add needed
that have become its most profitable mobile application,      muscle to terminal devices such as laptops, netbooks,
accounting for 76% of its mobile service revenues. Based      and e-readers beyond providing a built-in service port for
on its Google Earth platform and the Internet, Google         mobile phones.
has crafted a systematic database of e-map coordinates.
As users increasingly use services like Google Wi-Fi, and     Infrastructure construction promotes network
correct and refine map coordinates, Google can offer more     openness
accurate map navigation and mobile location services.
   During voice inquiries and location services, users           In addition to competitive services, low cost and
inform Google of their locations as they connect to its       high speeds are defining factors that shape the Internet
network. This allows Google to provide users with search      landscape. In 2008, despite its leading position, Google
and advertising services by location, and search a huge       failed to obtain spectrum in radio frequency bidding.
amount of geographical information for accurate location      However, the company prompted the FCC to open
information. This in turn helps ad agents accurately target   networks that operate within new spectrums, and then
ads to the audience likely to be most responsive.             gained access to open wireless networks. Afterward,
Free operating system provides built-in service               Google joined a number of telecom operators investing in
                                                              WiMAX, which has extended its competitive advantages
ports                                                         from the desktop search market to wireless.
   Android provides a platform that keeps Google                 In 2010, Google announced a plan to deploy FTTH
competitive in both the mobile operating system (OS)          access service in designated areas. Provided for up to
and mobile application areas. Android allows Google to        500,000 U.S. home users at a competitive price, the
extend its search services to the mobile world, consolidate   service delivers Internet access with speeds of up to 1Gbps.
and expand its user base. The OS also enables Google          Google also posted video clips on its YouTube website,
to accelerate expansion into the mobile application           aiming to seek partnerships for network construction.
service market and is now the preferred platform for          The aim of this move is to steer users toward high-speed
telecom operators. Google’s competitive edge has thus         broadband services and drive operators to open their
been sharpened in terms of open software sources, third-      network infrastructure.
party development, and industry chain alliances. All this        The booming U.S. broadband market has created
helps Google build a mobile data application service          opportunities and pressures that vary for different operators
platform and boost the development of mobile network          and looks set to be reshaped. To stay on top of the rising
applications.                                                 broadband boom, the operators mentioned above have
   In October 2008, Google unveiled the first Android         differentiated their business models to align their resources
G1 mobile phone in the U.S. By early 2010, Android            with strategic visions while creating a market ecosystem that
secured around 4% of the mobile OS market, putting it in      combines innovation and cooperation. This provides a role
a better position to compete against Symbian, Windows         model for other operators that would like to benefit from
Mobile, and iPhone OS. The Android platform has greatly       the huge and highly competitive broadband market.
increased the use of Gmail, the mobile store, and Google                            Editor: Xue Hua

                                                      Win-Win / AUG 2010

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